Hearing of House Committee on the Budget - The Economic Outlook and Current Fiscal Issues

HEARING OF HOUSE COMMITTEE ON THE BUDGET - THE ECONOMIC OUTLOOK AND CURRENT FISCAL ISSUES

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Mr. Case. Thank you. Mr. Greenspan, I share with my colleague, Mr. Cooper, membership on the House Blue Dog Caucus, and I think you can put my question and comments in that perspective.

Budgets, of course, are ultimately statements of policy expressing priorities, and that is what our job is, as you have definitely and accurately reflected.

I don't believe, as we look at the big picture of our Federal budget, that the basic facts are at serious issue. We have increasing expenses. Clearly you have talked to that. We have leveling revenues, attributable primarily to temporary tax cuts. The gap has led to chronic deficits and exploding debt.

The policy choices and priorities that are our job to make are for the most part, unfortunately, portrayed in Congress from a polar extreme perspective. And I think you can say there have been two directly different contrasting views expressed in this debate.

One would be basically that all of the temporary tax reductions are sacrosanct. We are not going to touch them. We want to go on with further tax reductions. And we will balance the budget, if at all, by--in the medium and short term--accumulating deficits and debt. And in the long term, whether we balance the budget or not, we will have radical reductions in Federal spending.

The other view is that we have needs that are growing and we have got to meet these needs. That is the number one priority with continued increases in funding, and we can't really afford to continue all of the tax cuts that we want. And if we are going to balance the budget, there are consequences there.

I think I have to say honestly, that personally and frankly I find both of these formulations not the right formulations. I cannot accept either one of those formulations as either wise or palatable or good overall public policy. I think they both, if carried to their extreme, have serious consequences on the economic and social fabric of our country.

I am always trying to look for a better formulation. And I have to confess that my biggest frustration in my service in Congress is the lack of commitment on a bipartisan basis--Mr. Edwards spoke to this--to find a better overall formulation, one which takes the best elements of both of those formulations but avoids the negatives of both of those formulations. Finding something that will actually work.

I have been listening to your testimony, and I want to ask you this straight out. You must have, in your thinking, some personal PAYGO calculation, some overall balancing of the best of these formulations and the worst of these formulations, that works from your perspective, that you believe over the long run will deal with what you have said and what you must believe is a chronic problem for our country, which is high deficits and exploding debt. You have testified to elements of support. For example, twice this morning you talked about your support of the continued elimination for the double taxation on dividends. You have testified on the expense side--and I think it is on the expense side, at least in the short term, to your support for some elements of private accounts.

Do you have some overall formulation or set of priorities, some overall calculus, that is somewhere in the middle of these two extremes?

Mr. Greenspan. Congressman, yes, I do.

Mr. Case. What is it?

Mr. Greenspan. I am not about to say for just a moment. The reason why I hope that is true is that there is no way for me to actually think through what I think is necessary in how the economy will evolve, given what is currently on the books with respect to both taxes and outlays. The arithmetic is fairly obvious when you begin to project it out. And with the inevitable issue of we are all going to get a year older every year and, therefore, a very large number of us who are not retired will, creates a very sharp issue of alternatives. And I have been thinking of all the various things of what I would do if I were a Congressman, because unless I did that, I couldn't be sure that I had all the pieces put together and I would be making generalizations.

Mr. Case. On the spending side, would you say given your calculus, the calculus you are talking about, that on the expense side of things, you are certainly concerned about the entitlement growth? Would that be correct?

Mr. Greenspan. I think what we have done is we have promised more to people who are not quite retired, but who will be retired over the next 20 years, than I actually think we have the material capability of supplying. I think this is utterly inappropriate. I think this is unfair. I think we owe it to those people to only promise to them what we have a reasonable chance of delivering. Public policy should not be structured in a manner in which when we promise something to somebody who really has to depend on it, that we come up late in the game and say, sorry, we made an arithmetical mistake.

Mr. Case. I am going to conclude with a rhetorical question because I'm out of time, on the calculus on the revenue side. At some point, there must be a sense of priorities that you have in terms of what tax reductions we can afford to extend in this calculus that will have a benefit to the economy on an ongoing sustainable basis and what we can't. And I will leave it at that.

Mr. Greenspan. I obviously do.

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